State-run PetroChina and privately held Hengli Petrochemical (Dalian) Refinery were awarded 4.43 million barrels of crudes in China’s first set of planned auctions from state crude reserves. The market had expected PetroChina and Hengli to be winners as they are located next to the state crude reserve sites in Dalian, Liaoning province.
PetroChina Dalian won 951,137 barrels of Qatar Marine and 1.1 million barrels of Forties, each cargo priced at $65/b. In comparison, Qatar Marine CFR North Asia at $74.78/b and Forties CFR North Asia at $78.18/b.
Both cargoes of the state crude reserves are stored in Dalian Xingang storage sites, which connects PetroChina Dalian with pipelines.
Hengli took 1.79 million barrels of Oman at $65/b and 592,031 barrels of Upper Zakum at $70.50/b. The prices are lower than the spot CFR North Asia prices of $75.18/b for Oman and $75.11/b for Upper Zakum on September 23.
Hengli is located in Changxing Island and has pipelines to connect the storage sites for the barrels in the same island.
“Prices at below $73/b are affordable,” Hengli said and added the notional prices for the cargoes of state crude reserves were $65/b. Participants said the auction for the Upper Zakum barrels were intensive as the price was raised 11 times, each by 50 cents/b, before concluding the deal at $70.50/b.
PetroChina Dalian was a strong competitor as Upper Zakum is one of its favourable crudes, in addition to ESPO. However, the 2.95 million barrels of Murban crude, which is stored in the Changxing Island site, failed to attract any bids.
“The cargo of Murban is bigger than any other cargoes, requiring more cash to conclude the deal,” an auction participant said. All participants needed to pay a Yuan 40/b ($6.19/b) of refundable deposit by 17:00 Beijing Time, according to the auction rules published by China’s National Food and Strategic Reserves Administration, or NFSRA.
This suggested bidders for Murban were required to prepare around Yuan 118 million ($18.25 million) cash in a week and make the rest of the payment in as long as 12 working days after winning the auction on September 24, the participant said.
Refiners expect NFSRA to host the next set of auctions for state reserve crude soon. The most likely option is expected to be barrels stored in Zhoushan site, Zhejiang province, according to market sources.
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